Thoughts on Apotheker, and why we're potentially concerned

Léo Apotheker is the new CEO of HP, or at least will be in short order, and it’s a choice we don’t think anybody predicted. He certainly wasn't on our radar. HP’s board says that Apotheker was the first and only person they offered the job, and according to recent SEC filings, he’s going to be making some serious money ($1.2 million annual salary, $4 million signing bonus, $4.6 million for moving expenses (buh?), and incentive bonuses ranging from 200%-500% of his salary). But just where did he come from, and what does his arrival at HP mean, especially for our favorite little business unit: Palm?

Apotheker is coming to HP off a short stint as CEO of German software monolith SAP. SAP is an enterprise software company, which as Sascha Segan of PC Magazine put it, sells “hideously boring but profitable enterprise software.” Apotheker spent twenty years at SAP, serving as “co-CEO” in 2008, before being elevated to CEO in May 2009. His reign at the top of SAP was not for long, as in February of 2010, the SAP board and Apotheker reached an agreement that saw him leaving the CEO position, the SAP board, and SAP as a company.

Now, you might be thinking, “only seven months and they already forced him to resign?” We were thinking that too, but that’s not what has as most worried. HP is a strong and seriously profitable company - if it turns out that the first and only choice for CEO is a dud, HP will be able to move on to somebody else without skipping a beat. And from what we can deduce from SAP’s carefully worded press releases over the years, Apotheker was dumped into a mess of a company when he took over as singular CEO. Shareholders demanded action, ignoring the fact that every company on the planet was suffering in February of 2010, and so he became the sacrificial lamb to the poor economy.

Here’s what has us concerned: Apotheker is a software guy. Not just a software guy, an enterprise software guy. His focus is selling complicated and expensive software solutions with serious regard to function, but little regard to form, to large firms. Divisions like printers and personal computers and handheld devices (i.e. Palm) have not factored into his management experience.

Apotheker’s words about what he plans to do at HP have been limited to meaningless “It’s a great privilege to run this company” CEO-speak. Of course he’s excited - HP is a big jump up from SAP and unemployment (not that he couldn’t have lived comfortably in perpetual retirement). We really have nothing to go on to predict how his tenure as CEO will go, except to look at his history elsewhere, and that’s what worries us.

HP is a massive company with some 300,000 employees making servers, software, personal computers, flexible displays, smartphones, printers, and everything in between. It’s a huge undertaking for anybody, but to hire a CEO with a specialty in one area strikes us as potentially foolish. We know that enterprise software is a ridiculously profitable division of HP, and we know that shifting to an enterprise-driven focus is what saved IBM a few years back.

But HP is not IBM. The latter company was hurtling towards collapse, struggling to carry along the dead weight of their hardware divisions. Shedding those and refocusing brought IBM back from the brink. HP is in no such situation. In fact, HP is the number one computer seller in the world, with nearly 20% of global units. HP also dominates the world of printers, claiming some 37% of that market. HP’s leverage all of their assets to become the world’s largest technology company, and quarterly profits approaching $2 billion on more than $30 billion in revenue would stand to back that up.

HP passed over a number of fantastic internal candidates before picking Apotheker. We don’t need to list the names (Todd Bradley, Phil McKinney) to know that there’s a lot of talent at the top of HP. And that’s talent that’s going to be at Léo Apotheker’s back, but in the end the decisions will be his. Does he have what it takes to run a multi-faceted monolith of a company like HP? We certainly hope so.